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No. of Recommendations: 1
but that "beat" may be less significant for some, due to their specific financial circumstances, goals and risk tolerances.

Absolutely! The portfolio has to fit as perfectly as a tailor made dress or suit!

Gotta be able sleep at night. ;-)

I slept beautifully during the dot-com bubble. When I woke up I had lost most of my portfolio. I have yet to recover! Talk about expensive education, in the low seven digits! While researching my first reply to this thread I charted my results for the past 24 years. Two things stood out, 1) growth was heavily correlated with bull markets, and 2) in each successive bear market I had lower percentage-wise losses. After the dot-com bubble I became more interested in exit strategies but in time I learned that it was not the holy grail, instead the holy grail is to have a sturdy portfolio of stocks you are willing to hold through a market crash. This is not dependent on value vs. growth, it depends on the business model, on companies/stocks that bounce back.. It does not depend on low volatility as predicated by the Modern Portfolio Theory (MPT). It's better to deal with volatility with good money management rather than to lower volatility by lowering yield.

Including the dot-com bubble bust I have been through five bear markets. In each one I had lower relative Y/Y losses. In 2001 it was over 86%, in 2009 it was 54%, the last one in 2018 was 22%. I can live with that because I have over one year worth of cash reserves and ample credit via my fully paid credit card and broker margin account that I very seldom use. Even so, on down draughts I still have to fight hard to overcome the fight or flight conditioning we got on the African Savanah several millennia ago. Fear, greed, and hubris are the enemies!

The above would not work for a mutual fund because members pull out cash at the wrong time and pile in at the wrong time because they have not mastered their African savannah fight or fight instincts! MPT was designed for investment funds to keep volatility low at the expense of yield.

Denny Schlesinger
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